Boeing workers attach a horizontal stabilizer to a 737 on Friday, June 3, 2011 in Boeing's 737 plant in Renton, Wash.

Boeing workers attach a horizontal stabilizer to a 737 on Friday, June 3, 2011 in Boeing's 737 plant in Renton, Wash.

Photo: Aubrey Cohen/seattlepi.com

Gregoire proposes spending $9.8 million to win new Boeing 737 line

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Washington must act now to cement its status as the best place for Boeing to assemble its re-engined 737 MAX aircraft, according to a new report.

"We still have a lot of work to do to make sure the 737 MAX is built in Washington State," Gov. Chris Gregoire said during a news conference Wednesday at Renton Technical College, near Boeing's current 737 assembly site.

The governor proposed $9.8 million in new spending to address the report's recommendations. She called that a good investment to ensure an expected $20,000 good jobs and $500 million in tax revenue from the assembly line.

Boeing announced in August that it would outfit its single-aisle 737 family with new, more efficient engines, rather than launching a replacement aircraft program. It plans to say next year where it plans to assemble the aircraft.

"Eight states in this country are ramping up to try to get the 787 MAX for their state," said Tayloe Washburn, a board member of the Seattle Metropolitan Chamber of Commerce and co-chairman of the Washington Aerospace Partnership.

"Washington is in the pole position to win the MAX. It is ours to lose," he said. "But we face serious competition, which is gaining on us."

For the report, consulting firm Accenture looked at potential sites in Washington, Texas, Kansas, South Carolina, Alabama, Florida, New Mexico, Idaho and California.

Renton leads thanks to its experienced workforce and the huge costs involved in setting up a new site, said Craig Gottlieb, a senior manager at Accenture and lead author of the study.

"Based on what we looked at in terms of cost to put it elsewhere, it makes sense to keep it here," he said. "Renton's looking very good."

But Gottlieb said he couldn't quantify such factors as Boeing's interest in spreading out production as a hedge against strikes and natural disasters. After all, the company put its second 787 Dreamliner assembly line in North Charleston, S.C., despite already having a 787 line up and running in Everett, Wash.

Gottlieb noted that the 787 uses a completely new production system, while there's not a lot of change from existing Next-Generation 737 to the 737 MAX.

Washington does have higher land and labor costs than many states, including a gap of about 15 to 20 percent over leading contender Texas, Gottlieb said. But the extra productivity of Washington's experienced workers "significantly mitigates that cost disadvantage," he added.

Washington can't expect to beat other states in land and labor costs, but should boost its worker edge, Gottlieb said. Given the state's aging aerospace workforce, this means focusing on education and training.

Washington has great university and technical programs, but states such as Texas and Kansas have programs that are more targeted at aerospace and integrated with employers, Gottlieb said.

Most of the report's recommendations for landing the 737 MAX focus on education, including boosting technical training, the number of university engineering students and amount of relevant research and focusing on science, technology, engineering and math in kindergarten through 12th grade.

The report also calls for extending state tax breaks for manufacturing and research, improving infrastructure, and fostering a good relationship between Boeing, its suppliers and unions.

These recommendations move beyond the 737 MAX to future airplane programs, which will be easier to put elsewhere, Gottlieb said.

In response, Gregoire proposed spending:

$450,000 to provide 12 high schools with aerospace curriculum support and give two Skills Centers aerospace manufacturing support to help train more high school students;

$7.6 million to create space for 775 more engineering students at the University of Washington and Washington State University; and

$1.5 million, with additional support from companies, foundations and donors, to create a Center for Aerospace Technology Innovation at UW and WSU.

In response to other report recommendations, Gregoire proposed creating a new Governor's Aerospace Office and extending the expiration date of the existing aerospace tax incentive for pre-production expenses from 2024 to 2034, to match the expected lifespan of the 737 MAX.

Asked how the cash-strapped state would pay for the new spending, Gregoire said about $1.5 million would come from the strategic reserve and: "The rest I'm going to ask the Legislature, despite our troubled times, to step up and invest."

While the report calls out the advantages of Renton, Gregoire did not endorse the city over other potential sites in the state. Officials in Spokane and Bremerton have expressed interest, while Boeing considered Moses Lake for its first 787 line.

"My main objective is to say it has to be in Washington State," she said.

Gregoire said she had not yet discussed the plan with Boeing executives, but her office has been "in constant contact" with the company, asking after its needs.

Responding in a statement to the report and Gregoire's proposal, Boeing said:

The state's aerospace study was a significant effort. We appreciate Governor Gregoire, the Washington Aerospace Partnership, and the Project Pegasus team's hard work to understand how to strengthen Washington's aerospace sector and its ability to compete for new business opportunities, such as the 737 MAX production site.

We are sure that the study results will provide valuable insights and ideas from the community as well as from education, political and business leaders who participated in the study, and we look forward to seeing the report and further discussing how the private and public sectors can work together. We believe that investing in competitiveness to position itself for new business opportunities while enhancing existing programs that create and sustain high-value jobs is crucial to the state's long-term economic health.

Because we haven't seen the report, it would be premature to comment until we have had time to read and digest the results.

Our decision regarding where we will build the 737 MAX is proceeding and we continue to explore and evaluate our options. We are following our established processes regarding production decisions and will evaluate what makes the most sense for our customers and for Boeing. Renton's experienced workforce and existing infrastructure will be considered in the assessment process. We anticipate having more clarity on where to build the 737 MAX in six to eight months.